RBI Rate Cut to Boost Affordable Real Estate: Experts
As the Reserve Bank of India (RBI) prepares for its monetary policy committee (MPC) meeting, industry experts anticipate a 25-bps repo rate cut, which could significantly boost the affordable housing market.
RbiReal EstateAffordable HousingRepo RateEconomic GrowthReal EstateJun 03, 2025
Given the prevailing benign inflation environment and the GDP growth of 6.5 per cent recorded in FY2025, the Reserve Bank is likely to proceed with a 25-bps repo rate cut this Friday (June 6). This move is expected to provide a much-needed boost to the real estate sector, especially in the affordable housing category.
“The case for a rate cut is further supported by the revival in the liquidity conditions to a surplus of Rs 3.6 lakh crore, which enhances the effectiveness of monetary transmission. Additionally, the softening of G-sec yields reflects bond market confidence in the RBI’s inflation and liquidity management and strengthens the rationale for easing rates,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
With the anticipated rate cut, the cumulative reduction in the policy rate in this cycle would be 75 bps. However, the focus must now shift to the pace and breadth of transmission. “While some commercial banks have begun to lower their MCLR and base rates, the adjustments have been modest. With liquidity conditions stabilising, there is now greater scope for commercial banks to accelerate the pass-through of policy easing to borrowers. This will be key to spurring consumer demand and private investment, ultimately supporting economic growth,” Baijal noted.
The Central Bank is projected to cut the repo rate by another 50 basis points (bps) this fiscal (FY26), after the 50 bps cut until April this year. Bank lending rates have begun easing, which should support domestic demand, according to a latest Crisil note. Experts said that with EMIs constituting a significant share of monthly income in the affordable category, even a modest reduction in lending rates can influence buying decisions, providing the necessary momentum to support this price-sensitive demand segment.
In summary, the anticipated rate cut by the RBI is expected to have a positive impact on the real estate market, particularly in the affordable housing segment. This could lead to increased demand and investment, contributing to overall economic growth.
Frequently Asked Questions
What is the expected repo rate cut by the RBI?
The Reserve Bank of India (RBI) is expected to cut the repo rate by 25 basis points (bps) this Friday (June 6).
Why is the rate cut important for the real estate sector?
The rate cut is important because it can lead to lower borrowing costs, which can significantly boost residential real estate demand, especially in the affordable housing segment.
How does the liquidity condition affect the rate cut?
The revival in liquidity conditions to a surplus of Rs 3.6 lakh crore enhances the effectiveness of monetary transmission, making it easier for banks to pass on rate cuts to borrowers.
What is the impact of a rate cut on EMIs?
Even a modest reduction in lending rates can significantly lower EMIs, making home purchases more affordable for the price-sensitive demand segment.
What is the projected repo rate cut for the next fiscal year?
The Central Bank is projected to cut the repo rate by another 50 basis points (bps) this fiscal (FY26), after the 50 bps cut until April this year.
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